2023 NACD Public Company Board Practices and Oversight Survey

The 2023 NACD Public Company Board Practices and Oversight Survey report presents results from our annual questionnaire. This report details responses from 328 public company directors on their boardroom activities to oversee several critical areas, including ESG, human capital, and artificial intelligence (AI). In addition to this report, the 2023 NACD Private Company Board Practices and Oversight Survey provides a summary of findings stemming from the responses of those serving on private company boards.

Key Findings

1. Board focus on artificial intelligence is in its early stages

Ninety-five percent of directors believe that the increased adoption of AI tools will impact their businesses, but it is not yet discussed regularly. Only 28 percent of respondents indicate that the topic of artificial intelligence features regularly in board conversations. Meanwhile, less than 10 percent report that their management teams are very or extremely proficient with AI issues. As the risks and opportunities of AI technology grow, boards must plan how they will oversee this new technology domain.

2. Boards steadfast in focus on ESG, but challenged by unclear standards

A majority (62%) of respondents continue to believe that ESG programs create long-term value within their organizations. Despite growing debates about ESG, more than half (58%) indicate that ESG issues have actually increased in priority. Their main governance challenge is lack of uniform disclosure standards, which complicates measurement and reporting of ESG-related activities. In fact, 46 percent of respondents cite the lack of uniform standards as the most challenging aspect of providing oversight to ESG issues.

Forty-four percent of respondents indicate that the frequency of climate change-related board discussions has increased over the past two years. This increase in board focus coincides with a slight increase in more concrete action by the companies these respondents oversee. Forty-six percent of respondents indicate that their company now has established climate targets, and that they are on track or ahead of schedule in reaching these targets, compared to 43 percent last year.

3. Climate issues increasingly feature in board discussions

Forty-four percent of respondents indicate that the frequency of climate change-related board discussions has increased over the past two years. This increase in board focus coincides with a slight increase in more concrete action by the companies these respondents oversee. Forty-six percent of respondents indicate that their company now has established climate targets, and that they are on track or ahead of schedule in reaching these targets, compared to 43 percent last year. 

4. As board engagement on human capital grows, more formal oversight practices are emerging

Boards are just starting to formalize their oversight of human capital issues. Only 34 percent have delegated specific human capital oversight elements to relevant committees and only 52 percent have discussed human capital strategy as a recurring agenda item.

While 82 percent of respondents feel that their board has the expertise to oversee human capital related risk, far fewer boards are actively probing how well human capital is managed across the enterprise. These boards are starting to apply the same rigor to human capital oversight as they do to financial reporting and strategy. For example, 36 percent assess how human capital drives performance and 44 percent evaluated the effectiveness of the CHRO.

5. Board culture can be undermined by problematic individuals and group dynamics—and virtual meetings

Thirty percent of respondents considered problematic individuals to be among the most significant barriers to sustaining an effective board culture, underlining the impact of each individual director. Group dynamics also have an effect, with 22 percent of respondents noting the deleterious effects of silos and subgroups of directors. Many boards have gained efficiencies through the use of virtual meetings, but excessive use of such meetings may exacerbate these barriers. A quarter of directors indicate that the lack of in-person interactions during virtual meetings has diminished the quality of discussion (26%) or board collegiality (26%).